Banking chief quits over debt rating fiasco

The chief executive of the Co-operative Bank has resigned after its debt was reduced to ‘junk’ status by a leading credit ratings agency.

It is understood that Barry Tootell, the bank’s chief executive for just under two years, planned to step down following the collapse of a deal to buy 631 branches from Lloyds Banking Group – also known as Project Verde.

Mr Tootell brought forward his resignation following the decision by Moody’s to downgrade the bank’s debt rating, and will be replaced by Rod Bulmer on an interim basis.

Moody’s estimates that the bank’s toxic debt ratio rose by a third in 2012 on the previous year, to 10.9%. Much of this is thought to stem from the takeover of the Britannia Building Society in 2009 and poorly performing commercial property loans.

The Co-op, which posted losses of £674 million last year, responded to Moody’s decision by pointing out that its “strong funding profile” exceeded regulatory requirements.

It conceded that it faced the same challenge as other banks in having to strengthen its capital position pending stricter regulatory requirements.

“Our primary current account base in recent years has enjoyed significant growth,” the bank said in a statement.

“The actions we will now take to strengthen our balance sheet and simplify our business model around a core relationship banking offer, will create a compelling co-operative banking business which is truly distinctive within the banking sector.”

The bank has already signalled plans to streamline its services by closing 37 branches in a merging process with Britannia